Flattry Might Get You Somewhere

24 Jul 2010

A couple of weeks ago, I saw a tweet that went along the lines of “Flattr sounds more like a pyramid scheme than a social network”. I’d never heard of this thing called Flattr, so I followed the link to this article. I found it interesting enough to write a mildly facetious tweet of my own, and before I knew it I’d been offered a beta invitation code by their “evangelist”. What the hell, I thought - it’s worth a tenner (or so - Flattr operates exclusively in Euros) to give it a proper try. Flattr basically works like this: content creators register “things” - articles, photo sets, videos, or anything else that can be published on the web - with the site. They then add a button, similar to the “Digg/Tweet/Like This” buttons that have been cropping up all over the place for the last couple of years, to the thing in question. Consumers then come along, and, if they like what they see, click the button to flattr (yes, it’s a verb as well) the thing. So far, so conventional.

The interesting part is what happens next. Every Flattr user allocates a certain amount of money per month for the purposes of flattry. At the end of each month, it’s divided evenly between all of the things flattr’d that month, and the money (less a cut) is added to the creator’s Flattr account (where it can be transferred to a real bank account). Basically, it’s a low-friction way to tip creators of stuff you enjoy.

In other words, it’s another micropayment system. The information superhighway is littered with the corpses of failed micropayment systems dating back to the 90s (when people still used terms like “information superhighway”). What reason is there to think that things will be different this time? Well…

Firstly, unlike many previous systems, Flattr is actually low friction. Flattring something is genuinely no more complicated than clicking a link. This is partly due to advances in things like AJAX (also known as JavaScript Actually Works Now), but mainly down to the clever way Flattr is set up. The even distribution reduces the thought process to a binary decision - there’s no need to think about how much you want to flattr a particular thing, just whether you want to flattr it or not - and the fixed monthly amount means that you don’t need to worry about accidentally overspending. The upshot is that Flattr fits in with the way you already browse the web.

Secondly, the company has a clear revenue model - the cut of contributions that I mentioned above. This is predictable, as each active user by definition pays out a fixed amount each month, a fixed proportion of which goes back to Flattr. Equally important, it scales with their costs. The more active users they have, the more servers and staff they need to keep the service running, but the more revenue they’re getting in. They’re not only providing a way for people to pay for things on the web, they’ve come up with a model where users pay to keep the service itself on the web. (The fact that paying for a service you use sounds like a radical idea is testament to the weird hall of mirrors that is the web economy.)

At this point, you may be asking yourself, “Why do I care what the business model is? I just want the site to be there.” The reason I care is that running a non-trivial site like Flattr takes money. Significant amounts of money. The most reliable way to ensure the continued existence of such a service is for it (or, more accurately, the company behind it) to turn a profit. For this, they need a revenue stream. In most cases, services are reluctant to charge users directly, as they rightly or wrongly believe that the users expect things to be free. However, they have to get the money from somewhere. When I can’t see where this is, I get nervous.

Perhaps the best example of this at the moment is facebook. It’s recently been reported that the company is at last making a reasonable profit. I am, under sufferance, a facebook user. Like everyone I know who’s signed up, I have never given them any money. So where is the profit coming from? Maybe it’s from creaming a percentage off all of the money people shell out to not play Farmville. However, there’s a more obvious answer: targeted advertising. In some cases, this can be benign, even helpful. For example, in connection with the turning-a-profit story, Channel 4 News interviewed the owner of a wedding venue who’s adverts appeared on the pages of users in the relevant area when their relationship status changed to “engaged”. However, in other cases, it feels intrusive, even oppressive.

The worrying aspect is that, from outside the company, we have absolutely no idea what they’re doing. We just know that they’re doing something to turn a profit. If you hand over a monthly subscription that covers the cost of providing you with the service in question, the company has little motivation to do anything nefarious to make extra money from you. If you get the service for free, they’re practically obliged to. Another way of looking at it is that, instead of handing over cold, hard cash, you’re handing over a wealth of personal and demographic information about yourself and your social network (in the old-fashioned sense). The value of the latter is difficult to quantify, especially if you have no idea what they’re doing with it.

So, I like Flattr as a consumer because it’s easy, and because their business model doesn’t suggest they’re going to rip me off or sell my personal data to the highest bidder. However, how does it fare as a creator? One key objection, raised by my friend Steven, is that it doesn’t require you to pay for any particular thing you consume. Steven likened this to busking; I think of it more as an honesty box. However, given that the thing being payed for is neither a physical object nor a performance, I don’t think either analogy captures the whole story.

At this stage, it’s impossible to say whether Flattr will soar to ubiquity, or collapse under the weight of spam, fraud or indifference to join the other failed attempts at the side of the road. However, it seems to me to be an interesting experiment, at the very least. Is it an appropriate payment method for everything? Clearly not - you couldn’t rely on Flattr to fund a Hollywood movie, for example. Is it a useful option amongst many? Only time will tell, but I’m happy to spend a bit of pocket money in order to find out.

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